Gains for miners, financials boost London

FTSE 100 jumps 180.70 points; ICI up on Azko Nobel deal

By

SarahTurner

LONDON (MarketWatch) -- Mining shares on Monday helped the top London index post its best one-day gain in over four years, after central banks instituted a series of monetary actions aimed at providing a breather from ongoing subprime worries.

The FTSE 100 index (UKX) closed up 3%, or 180.70 points, at 6,219.00 and recovered a portion of last week's losses.

The index hasn't shown this big a gain since March 13, 2003, when it surged 199.90 points.

However, the gains follow steep losses on Thursday and Friday last week, when the FTSE 100 slumped by more than 6%. This move brought losses for the index from the middle of July to 10%.

On Friday alone, the index lost 3.7%, its sharpest decline in more than four years.

Still, on Monday London paced a broader regional move higher as Morgan Stanley told clients that it's a good time to buy European shares and U.S. shares started in the green. See Europe Markets.

"Markets in general are gaining confidence from central banks supporting liquidity," said David Page, an economist at Investec Securities.

And Amit Thakar, strategist at stockbroker Seymour Pierce, noted that equity market fundamentals for the U.K. haven't changed dramatically recently. "When the market falls, these issues are pushed aside but when you focus on fundamentals, the market is attractive," he said.

Miners were by far the strongest gainers in the FTSE 100, with shares of copper miner Kazakhmys (KAZ) up 10.4% after an upgrade to buy at UBS.

Also on the rise were shares of Antofagasta (ANTO), up 10.5%, as well as Rio Tinto
RIO, -0.53%
(RIO), up 7.1%, and Anglo American (AAL), up 8.3%.

"We still find metals and mining as offering value and stay overweight," said global equity strategists at Credit Suisse.

UBS singled out shares of Kazakhmys as having lost 27% since the market correction started in mid-July, while shares of peer Antofagasta lost a mere 13%. Kazakhmys is now one of the best value stocks in the U.K. mining sphere, UBS said.

Miners and financials had been among stocks hit the hardest in last week's sharp sell-off as investors worried that fallout from the current U.S. subprime woes could be more serious than first thought.

Central banks stepped in to calm fears in the money markets last week. On Monday, the Japanese, Australian and European central banks were back at it, injecting more cash to ensure sufficient liquidity in financial markets. See Asia Markets.See ECB story.

Financials on the move

London-listed financials such as insurance group Old Mutual (OML), private-equity fund manager 3i Group (III) and hedge-fund manager Man Group (EMG) also rebounded in London, all up more than 5.1% in the top index.

Dresdner Kleinwort's financial-sector analysts raised their target price on Man Group to 680 pence a share, noting that the company's shares have fallen 15% in the past two days.

"While it may be hard to convince people to call the turn on the stock at present, it is at an attractive price. The company sees that, having spent nearly 100 million pounds buying back shares in the past 10 days," said the analysts.

Man Group's shares rose 6.8% to 512 pence.

Consumer spending-sensitive stocks were also on the rise, as investors' fears about a spillover of subprime woes to the real economy ebbed somewhat.

The broker told clients that while hotel shares were hit in the past weeks as credit concerns sparked fears of higher property yields, it believes the turmoil will pass without a major impact on the outlook for hotel companies.

Shares of Millenium & Copthorne rose 7.8%.

Also higher, Michael Page (MPI) saw its shares jump 9.4% after Morgan Stanley said that it has started buying the firm as part of its bullish broader stance on European equities.

"Normally on a much larger premium to peers and market, Page operates purely in professional staffing and its more than 75% permanent placement, so is better positioned for the late cycle," the strategists said.

Merrill Lynch upgraded diversified engineering group FKI (FKI) to neutral from sell, saying that while it doesn't expect the stock to outperform, it believes valuation will act as a support and there's little absolute downside remaining. FKI's shares jumped 11%.

ICI agrees to Akzo deal

Deals also were on London's agenda.

Shares of paints firm Imperial Chemical Industries (ICI) moved up 2.8% to 642 pence after it agreed to be acquired for 670 pence a share by Akzo Nobel (00913), the Dutch company with interests in health care, coatings and chemicals.

The price on the deal equals $54.16 per U.S.-listed ICI share. Valued at 8 billion pounds, or $16.17 billion, the transaction promises to create a major worldwide coatings producer and one of the world's largest specialty-chemicals enterprises. See full story.

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